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Thursday, March 11, 2010
Would the proposals create a big new bureaucracy?

Maybe.
Several factors indicate that the mechanism needed to regulate insurance at the federal level could be smaller than that of the combined states. About half of state insurance bureaucrats work to review insurance company rate filings; the proposed federal agency would not do that. On the other hand, the legislation before the House (although not Geithner’s proposal) would require the establishment of federal insurance regulation offices in all 50 states. This may be unnecessary and could limit flexibility. Sparsely populated states - Wyoming, for example - probably do not need their own offices, while largely populated states like Florida, where insurance is a major political issue, may find it better to have multiple offices. It is probably best to let the Treasury Department or some other federal agency decide on the specific locations of offices rather than having Congress mandate it.
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National Regulatory Modernization for Insurers FAQ's
Would the proposals create a big new bureaucracy?
Would these national regulatory proposals increase compliance costs?
Would the creation of a national regulator help incumbent companies make larger profits?
Is an Office of Insurance Information a good idea as a precursor to a national insurance market?
What would the proposed national regulators affect state regulation? What about federalism?
Will states lose tax revenue under an Optional Federal Charter?
Would insurance companies withdraw from certain parts of the country under an OFC?
Would there be a ''race to the bottom''?
Would an OFC subject insurance companies to both federal and state laws, thus increasing the overall burden of regulation?
What is really wrong with the current state system?
Will an OFC help the development of new insurance products?
Is the insurance industry unified in its support of OFC?
Would local insurance agents go out of business under an OFC?
Supporters and opponents of an OFC both cite Illinois as an example of what the market would look like under an OFC. What is the Illinois market like?
What would an OFC do for America’s international competitiveness?
Do other developed countries have something like an OFC?
Would an OFC protect consumers from insurance fraud?
Will it confuse consumers?
Do government-set rates protect consumers?
J. Robert Hunter of the Consumer Federation of America has presented a range of data showing that publicly held insurance companies are relatively safe investments and have become safer in recent years. Does this prove that the insurance industry is reaping more profits than it deserves and should not be rewarded with an Optional Federal Charter?
Does a ''revolving door'' between the industry and regulators prove that the insurance industry and the state regulatory systems are corrupt or that the insurance industry ''owns'' state regulators?
Is an OFC the only way America could liberalize its insurance markets?
What are some alternatives to an OFC?
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